What Is a Balance Transfer Credit Card?

If you’ve heard the term “balance transfer”, you’ve likely found yourself wondering “what does a balance transfer on a credit card mean?”. A balance transfer is when you move the balance that you have on one credit card over to a new one—usually, you move your balance to a card with a better interest rate or higher credit limit. 

For example, some cards offer a 0% introductory rate, meaning that if you’re carrying a balance that’s accruing interest on your current card, you may be able to switch to the new one and stop paying interest for as long as the introductory rate lasts. 

Using a balance transfer card can be a good option for those in credit card debt—if they are used wisely. If not, they may result in even more debt, or simply continuing the cycle of debt with a new credit card. 

This post is your one-stop guide to what a balance transfer credit card is, how they work, the pros and cons, and whether they’re right for you. Here’s what we’ll explain:

• What Is a Balance Transfer from a Credit Card?
• What Is a Balance Transfer Credit Card?
• How Do Balance Transfer Credit Cards Work?
• Pros & Cons of Balance Transfer Credit Cards
• Is a Balance Transfer Credit Card Right for You?

Many people consider balance transfer credit cards, and in some cases, they can be a wise choice. However, it’s important to think through that decision with the knowledge of what exactly a balance transfer credit card is. We’ll start there. 

What Is a Balance Transfer from a Credit Card?

A balance transfer from a credit card is when you move the balance that you carry on one card to another credit card.

In some cases, credit cards might have 0% introductory rates. This could make repaying your credit card debt even easier, and is often very enticing for people who carry a large balance with high interest rates.

There are a few reasons why someone might want to perform a balance transfer from a credit card. They include:

• Choosing a card with a lower interest rate to make repaying your debt easier and faster. 
• Having a larger line of credit so they can still put purchases on the card even as they repay existing debt. 
• Consolidating debt from multiple credit cards onto one card. 
• Finding a card with more agreeable terms. Some cards might charge punishing late fees or over-credit-limit fees, so it can be advantageous to switch to one that doesn't. 
• Improving their credit score. Your credit utilization accounts for 30% of your FICO® Score, so using a card with a higher credit limit allows you to have a lower credit utilization rate. 

Note that the amount you may transfer will most likely be limited by the credit limit on your new card. Balance transfers may be subject to a separate limit amount established by some credit card providers. 

The reason you might consider a balance credit card offer is if your credit card debt situation. If your current credit card has a high interest rate, for example, you might not be able to afford to pay a high interest rate on top of making the repayments on the principal amount you borrowed. A card with a lower interest rate could make it much more affordable. 

The balance transfer might take several weeks to complete, depending on the method you pick and how long it takes the two creditors to make the payments. During this time, you should continue to make timely payments to all of your accounts. If you don't, you could end up making a late payment, which might result in late fees or other penalties.

What Is a Balance Transfer Credit Card?

So, what is a balance transfer credit card then? A balance transfer credit card is a type of credit card that allows you to use it to do a balance transfer. Certain cards are built to be more favorable to people who want to do a balance transfer and even offer low, attractive introductory rates to make balance transfers easier, offering concrete credit card debt relief. 

You may also hear the term balance transfer credit card offer or a balance transfer and purchase credit card.

• What is a balance transfer credit card offer? It refers to the specific terms associated with a balance transfer card offered by a provider. 
• What is a balance transfer and purchase credit card? Just another name for a balance transfer card. If you didn’t know you can also use this card to make more purchases in addition to moving over your existing balance.

Some cards might have a special credit limit for balance transfers, but in many cases, your credit card debt may be higher than the limit. If that’s the case for you, it may be wiser to consolidate credit card debt through a personal loan, rather than a credit card. The aim, in either case, is to opt for a financing tool that has a lower interest rate than your current credit card balance. 

What Is a Balance Transfer Credit Card Fee?

Some cards have a balance transfer fee attached to moving your money from an old card to your new one. In most cases, it’s around 3% - 5%. So, if doing that puts your balance at a higher amount than the amount you’ll save with an improved interest rate, it’s not worth it to transfer. 

Be sure that you do the math, or speak directly with a financial advisor, if you’re worried that balance transfer fees could make it financially more difficult to pay off your credit card debt. 

How Do Balance Transfer Credit Cards Work?

Transferring a balance is usually pretty simple and straightforward. If you’re approved, you'll be able to choose which balances you'd want to move to the new card when you apply for a balance transfer credit card. Then, for each credit account you want to transfer, you’ll enter the account details (like your credit card number) as well as the amount you want to transfer to your new balance transfer credit card.

It typically takes anywhere from a week to a few weeks, or even a month for your balance to transfer. So, if you do have payments due on your old card during that time, be sure that you continue to pay them until the transfer is complete. Once it is complete and your old credit card account is closed, be sure that you stay on top of your new credit card’s due dates, terms, and conditions, which will all likely be different from your old card. 

Pros & Cons of Balance Transfer Credit Cards

Like any financial tool, using a balance transfer credit card has pros and cons. In some cases, it works out very well for people looking to affordably pay down credit card debt. In other cases, it could lead to some serious headaches, or even falling deeper into debt in some serious situations. 

Pros

• 0% interest rate. In some cases, you’ll have an introductory rate of 0% on your new card. That’s pretty useful, as it could give you a boost in repaying your credit card debt without having to pay interest on top of repaying your principle. 

• Consolidate debt. If you have credit card debt across multiple accounts, a balance transfer credit card could be a great way to consolidate it all into one convenient payment, allowing you to avoid paying interest across multiple different accounts. 

• Better terms and conditions. In most cases, it only makes sense to transfer your balance if you’ll get better terms and conditions along with your transfer. 

Cons 

• Balance transfer fees. As mentioned, some cards charge a balance transfer fee when you are approved. This can be as much as 5% or sometimes even more, so it’s important to figure out whether this will end up costing you more overall than not transferring your balance. 

• Risky in some cases. If getting a new credit card is just bandaging up a deeper spending problem, transferring your balance might not be a smart fix. It’s important to still improve your financial habits and develop a better relationship with your credit card, even if you do secure a good balance transfer credit card deal. 

Is a Balance Transfer Credit Card Right for You?

It can be difficult to determine whether a balance transfer credit card is right for you. The best way to figure out what makes the most sense for your finances is to browse balance transfer credit card offers and see if the terms, rate, and balance transfer fees make the most sense for your finances. If it looks like you’ll be able to pay less in the long run, a balance transfer credit card might be right for you.

For everything else personal finance, there’s always the Mint app. Mint can help you aggregate all your personal financial information into one convenient place. Download the app today to keep tabs on your credit card debt across multiple accounts, as well as your budgets, and how quickly you’ll be able to pay off debts. You can also start by using our free credit card repayment calculator to get a better sense of what your timeline looks like!